NAR Offers Housing Slump Hope in Latest Findings

The National Association of Realtors released its latest data today, and although most news reports have focused on the home sale and price information, some missed one of the report’s most important findings: The home inventory may have shrunk.

According to NAR, the U.S. home supply dropped 3 percent at the end of last month to 4.03
million. That’s a 9.6-month supply, compared to the 10.2-month supply that existed at the end of January.

Which is a really, really big deal.

For months, economists have agonized over the bloated housing supply, wondering when it would shrink, and how. Everyone agrees we need to reduce it to spur sales and residential building–right now, the supply of for-sale homes is throwing off any kind of demand for housing that would motivate sales and raise prices–but the general consensus is that buyers are waiting for prices to drop further to get better deals.

But, we all wondered, when would buyers get motivated to make an offer? When would homes start disappearing from that inventory?

It seems that happened last month–which NAR attributes to local price declines and more favorable market conditions–which could be a positive sign that the turnaround has begun. We’ll know more next month.

Multifamily property sales also fared decently in February. NAR also said that existing condo and co-op sales increased 3.7 percent to a
seasonally adjusted annual rate of 560,000 units in February from a
downwardly revised 540,000 in January. The rate is 29.7 percent below the
February 2007 pace.

The median existing condo price last month was $211,700–4.9 percent lower than a year
ago. While that is a decline, it’s less of a drop than the median existing single-family home price, which fell 8.7 percent compared to February 2007.

Now, the NAR is known for being sunny: And recent news reports indicate some industry experts don’t think the housing slump is at all close to being over–the Freddie Mac CEO recently said he thought prices had only dropped a third of how far they eventually would before the decline is over.

But could the recent housing inventory reduction be a sign that the slump has finally bottomed out?

"The higher loan limits for both FHA
and conventional loans will increase consumer choice and provide
greater access to lower interest rate mortgages in high-cost regions,” said Lawrence Yun, NAR chief economist. "Therefore, a notable rise in home sales can be anticipated
in the second half of the year."